notice of assignment of a debt

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Debt Assignment: How They Work, Considerations and Benefits

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

Investopedia / Ryan Oakley

What Is Debt Assignment?

The term debt assignment refers to a transfer of debt , and all the associated rights and obligations, from a creditor to a third party. The assignment is a legal transfer to the other party, who then becomes the owner of the debt. In most cases, a debt assignment is issued to a debt collector who then assumes responsibility to collect the debt.

Key Takeaways

• Debt assignment is a transfer of debt, and all the associated rights and obligations, from a creditor to a third party (often a debt collector).
• The company assigning the debt may do so to improve its liquidity and/or to reduce its risk exposure.
• The debtor must be notified when a debt is assigned so they know who to make payments to and where to send them.
• Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA), a federal law overseen by the Federal Trade Commission (FTC).

How Debt Assignments Work

When a creditor lends an individual or business money, it does so with the confidence that the capital it lends out—as well as the interest payments charged for the privilege—is repaid in a timely fashion. The lender , or the extender of credit , will wait to recoup all the money owed according to the conditions and timeframe laid out in the contract.

In certain circumstances, the lender may decide it no longer wants to be responsible for servicing the loan and opt to sell the debt to a third party instead. Should that happen, a Notice of Assignment (NOA) is sent out to the debtor , the recipient of the loan, informing them that somebody else is now responsible for collecting any outstanding amount. This is referred to as a debt assignment.

The debtor must be notified when a debt is assigned to a third party so that they know who to make payments to and where to send them. If the debtor sends payments to the old creditor after the debt has been assigned, it is likely that the payments will not be accepted. This could cause the debtor to unintentionally default.

When a debtor receives such a notice, it's also generally a good idea for them to verify that the new creditor has recorded the correct total balance and monthly payment for the debt owed. In some cases, the new owner of the debt might even want to propose changes to the original terms of the loan. Should this path be pursued, the creditor is obligated to immediately notify the debtor and give them adequate time to respond.

The debtor still maintains the same legal rights and protections held with the original creditor after a debt assignment.

Special Considerations

Third-party debt collectors are subject to the Fair Debt Collection Practices Act (FDCPA). The FDCPA, a federal law overseen by the Federal Trade Commission (FTC), restricts the means and methods by which third-party debt collectors can contact debtors, the time of day they can make contact, and the number of times they are allowed to call debtors.

If the FDCPA is violated, a debtor may be able to file suit against the debt collection company and the individual debt collector for damages and attorney fees within one year. The terms of the FDCPA are available for review on the FTC's website .

Benefits of Debt Assignment

There are several reasons why a creditor may decide to assign its debt to someone else. This option is often exercised to improve liquidity  and/or to reduce risk exposure. A lender may be urgently in need of a quick injection of capital. Alternatively, it might have accumulated lots of high-risk loans and be wary that many of them could default . In cases like these, creditors may be willing to get rid of them swiftly for pennies on the dollar if it means improving their financial outlook and appeasing worried investors. At other times, the creditor may decide the debt is too old to waste its resources on collections, or selling or assigning it to a third party to pick up the collection activity. In these instances, a company would not assign their debt to a third party.

Criticism of Debt Assignment

The process of assigning debt has drawn a fair bit of criticism, especially over the past few decades. Debt buyers have been accused of engaging in all kinds of unethical practices to get paid, including issuing threats and regularly harassing debtors. In some cases, they have also been charged with chasing up debts that have already been settled.

Federal Trade Commission. " Fair Debt Collection Practices Act ." Accessed June 29, 2021.

Federal Trade Commission. " Debt Collection FAQs ." Accessed June 29, 2021.

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Notice of Assignment: Debt Terms explained

Our team is responsible for verifying the accuracy of content as it’s created. Facts, figures, and eligibility requirements evolve over time, however, so there may be occasional oversights. We would always advise you to review the terms and conditions of any product before submitting an application.

A Notification of Assignment is employed to notify debtors that a third party has ‘acquired’ their debt. The new company (assignee) assumes responsibility for the collection processes, occasionally engaging a debt collection agency to retrieve the funds on their behalf.

2nd May 2019

A creditors’ main goal is to lend you money and to collect it, so they’re not the biggest fan of chasing those who fall into arrears. As such, sometimes they’ll pass arrears on to other companies.

Being in debt can get confusing as it is, but especially so if a situation arises where you owe money to your mortgage lender, then a letter comes through your door from a company you’ve never heard of asking you to make payments to them instead.

This is what’s known as a Notice of Assignment (NOA) . They are sent to inform you that a third party has bought a debt that you owe from the company you borrowed it from.

If your debt is assigned to a new owner, they will then take over the previous company’s responsibility for debt collection and will sometimes hire a collection agency to work on their behalf.

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What is a notice of assignment

A Notice of Assignment, in relation to debt, is a document used to inform debtors that their debt has been ‘purchased’ by a third party.

The notice serves to notify the debtor that a new company (known as the assignee) has taken over the responsibility of collecting the debt.

This means that the debtor should direct their future payments and communications regarding the debt to the assignee instead of the original creditor. T

he assignee may choose to handle the debt collection procedures themselves or may engage a debt collection agency to recover the outstanding amount on their behalf.

Types of assignment

There are two types of assignment that a creditor can make – Legal and equitable.

Both of them fall under the Law of Property Act 1925 and both require the creditor to notify you of the change in writing.

It also isn’t possible to assign only part of a debt to a third party. If a creditor is ‘selling’ your debt, they have to sell the debt as a whole, and that debt will become one of the purchasing company’s obligations.

We set out the differences between legal and equitable assignments below.

A legal assignment gives the purchasing party the power to enforce the debt. You will also then make payments to this company instead of the original creditor.

When a debt goes through an equitable assignment, it is only the amount owed that is transferred.

In these instances, the purchasing company cannot enforce the debt and the original creditor will still retain their original rights and responsibilities.

Why do creditors sell debts?

One of the most common questions asked when a notice of assignment is received is why? Why have they sold it and how can they?

The answer is that is it is actually perfectly legal for them to sell your debt to another company.

When you sign a credit agreement there will have been a clause within the fine print. This will have stated that they are able to assign their rights to a third party .

As you have signed for this, they do not need to ask your permission to ‘sell’ the debt and you are unfortunately unable to dispute it.

The only exception to this rule is if the lender pledges to the Standards of Lending Practice and you have given evidence of mental health issues previously.

In these instances, your debt should not have been sold and you should seek advice on this.

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What does a notice of assignment mean for you?

If a creditor passes one of your debts to a third party, they will notify the credit reference agencies that they are now responsible for the collection.

The previous company’s name will be removed from your credit file and that any defaults will also be registered in their name.

Many people often find that having a debt being passed to a third party is a blessing in disguise.

The new company might be easier to deal with or be more flexible. They may offer to freeze interest on your debts, for example, giving you more scope to repay what you owe more quickly.

Ultimately, getting your debt paid off is in both yours and the creditors best interests.

Agreeing to a manageable payment plan gives you some breathing space and it can often mean they won’t need to take any further action against you.

It’s also worth noting that this also does not reset the six-year period for the debt to become statute-barred and debts that are already in this category will remain as such.

Assignment and debt collection agencies

Sometimes, the purchasing company will employ a debt collection agency to act on their behalf or the debt will be purchased by an agency themselves

They will take over the full rights to the debt and attempt to collect it from you in full.

As such, they will contact you by letter, phone calls, texts or emails. It also means that they can take further action against you should you continue to default on the account.

However, unless it is stated otherwise, debt collection agencies only work on behalf of a company.

The purchasing company will still own the debt, although some collection agencies do deal in debt purchasing also.

It’s also important to remember that although they can contact you for payment, they still have to abide by creditor etiquette.

They cannot pretend to have certain legal powers or lie to you, break data protection laws or search for you on social media.

You’ll likely find that debt collection agencies are often open to negotiations, so it is always best to contact them as soon as possible when they contact you for payment.

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Assignment and debt solutions.

If you are already in some form of debt solution such as an IVA , Trust Deed or a DMP that is run privately by a company, you must notify the company running your agreement.

They will make the necessary updates to their records and contact the company to arrange payment to the new company.

If you are managing your own debts, you will need to cancel any payment to the original company and set up a new one to the purchasing company or debt collection agency.

In this instance, you may be asked to show them an up to date state of affairs in case any changes need to be made.

If you’re receiving notices of assignment and struggling with debt collection, call us today. A qualified adviser will be on hand to give you free confidential advice and help you find the right solution for your debts.

KEY TAKEAWAYS

• Creditors often transfer arrears to other companies to handle debt collection.
• A Notice of Assignment (NOA) informs debtors that their debt has been purchased by a third party.
• The assignee, the new company, assumes responsibility for collecting the debt.
• Debtors should direct future payments and communication regarding the debt to the assignee.
• The assignee may handle debt collection internally or engage a debt collection agency.

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed's, and various other debt solutions.

How we reviewed this article:

Our debt experts continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

Written by Maxine McCreadie

Edited by Ben McCormack

Edited by Maxine McCreadie

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Assigning debts and other contractual claims - not as easy as first thought

Harking back to law school, we had a thirst for new black letter law. Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won’t bore you with the detail, but suffice to say that what’s important is that a legal assignment must be in writing and signed by the assignor, must be absolute (i.e. no conditions attached) and crucially that written notice of the assignment must be given to the debtor.

When assigning debts, it’s worth remembering that you can’t legally assign part of a debt – any attempt to do so will take effect as an equitable assignment. The main practical difference between a legal and an equitable assignment is that the assignor will need to be joined in any legal proceedings in relation to the assigned debt (e.g. an attempt to recover that part of the debt).

Recent cases which tell another story

Why bother telling you the above?  Aside from our delight in remembering the joys of debating the merits of legal and equitable assignments (ehem), it’s worth revisiting our textbooks in the context of three recent cases. Although at first blush the statutory conditions for a legal assignment seem quite straightforward, attempts to assign contractual claims such as debts continue to throw up legal disputes:

• In  Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm),  the High Court held that a performance bond issued under a construction contract was not effectively assigned despite the surety acknowledging a notice of assignment of the bond. Sadly, the notice of assignment failed to meet the requirements under the bond instrument that the assignee confirm its acceptance of a provision in the bond that required the employer to repay the surety in the event of an overpayment. This case highlights the importance of ensuring any purported assignment meets any conditions stipulated in the underlying documents.
• In  Promontoria (Henrico) Ltd v Melton [2019] EWHC 2243 (Ch) (26 June 2019) , the High Court held that an assignment of a facility agreement and legal charges was valid, even though the debt assigned had to be identified by considering external evidence. The deed of assignment in question listed the assets subject to assignment, but was illegible to the extent that the debtor’s name could not be deciphered. The court got comfortable that there had been an effective assignment, given the following factors: (i) the lender had notified the borrower of its intention to assign the loan to the assignee; (ii) following the assignment, the lender had made no demand for repayment; (iii) a manager of the assignee had given a statement that the loan had been assigned and the borrower had accepted in evidence that he was aware of the assignment. Fortunately for the assignee, a second notice of assignment - which was invalid because it contained an incorrect date of assignment - did not invalidate the earlier assignment, which was found to be effective. The court took a practical and commercial view of the circumstances, although we recommend ensuring that your assignment documents clearly reflect what the parties intend!
• Finally, in Nicoll v Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch),  the High Court held that a notice of assignment of a debt given to a debtor was valid, even though the effective date of assignment stated in the notice could not be verified by the debtor. The case concerned a debt assigned by the Co-op Bank to Promontoria and a joint notice given by assignor and assignee to the debtor that the debt had been assigned “on and with effect from 29 July 2016”. A subsequent statutory demand served by Promontoria on the debtor for the outstanding sums was disputed on the basis that the notice of assignment was invalid because it contained an incorrect date of assignment. Whilst accepting that the documentation was incapable of verifying with certainty the date of assignment, the Court held that the joint notice clearly showed that both parties had agreed that an assignment had taken place and was valid. This decision suggests that mistakes as to the date of assignment in a notice of assignment may not necessarily be fatal, if it is otherwise clear that the debt has been assigned.

The conclusion from the above? Maybe it’s not quite as easy as first thought to get an assignment right. Make sure you follow all of the conditions for a legal assignment according to the underlying contract and ensure your assignment documentation is clear.

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What is an Assignment of Debt?

By Vanessa Swain Senior Lawyer

Updated on February 22, 2023 Reading time: 5 minutes

This article meets our strict editorial principles. Our lawyers, experienced writers and legally trained editorial team put every effort into ensuring the information published on our website is accurate. We encourage you to seek independent legal advice. Learn more .

Perfecting Assignment

• Enforcing an Assigned Debt 

Recovery of an Assigned Debt

• Other Considerations 

Key Takeaways

Frequently asked questions.

I t is common for creditors, such as banks and other financiers, to assign their debt to a third party. Usually, an assig nment of debt is done in an effort to minimise the costs of recovery where a debtor has been delinquent for some time. This article looks at:

• what it means to ‘assign a debt’;
• the legal requirements to perfecting an assignment; and
• common problems with enforcing an assigned debt. 

Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.

This manual aims to help business owners, financial controllers and credit managers best manage and recover their debt.

An assignment of debt, in simple terms, is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once a debt is properly assigned, all rights and responsibilities of the original creditor (the assignor ) transfer to the new owner (the assignee ). Once an assignment of debt has been perfected, the assignee can collect the full amount of the debt owed . This includes interest recoverable under the original contract, as if they were the original creditor. A debtor is still responsible for paying the outstanding debt after an assignment. However, now, the debt or must pay the debt to the assignee rather than the original creditor.

Purchasing debt can be a lucrative business. Creditors will generally sell debt at a loss, for example, 20c for each dollar owed. Although, the amount paid will vary depending on factors such as the age of the debt and the likelihood of recovery. This can be a tax write off for the assignor, while the assignee can take steps to recover 100% of the debt owed. 

In New South Wales, the requirements for a legally binding assignment of debt are set out in the Conveyancing Act :

• the assignment must be in writing. You do this in the form of a deed (deed of assignment) and both the assignor and assignee sign it; and
• the assignor must provide notice to the debtor. The requirement for notice must be express and must be in writing. The assignor must notify the debtor advising them of the debt’ s assign ment and to who it has been assigned. The assignee will send a separate notice to the debtor, putting them on notice that the debt is due and payable. They will also provide them with the necessary information to make payment. 

The assignor must send the notices to the debtor’s last known address.  

Debtor as a Joined Party

In some circumstances, a debtor will be joined as a party to the deed of assignment . There can be a great benefit in this approach . This is because the debtor can provide warranties that the debt is owed and has clear notice of the assignment. However, it is not always practical to do so for a few reasons:

• a debtor may not be on speaking terms with the assignor; 
• a debtor may not be prepared to co-operate or provide appropriate warranties; and
• the assignor or the assignee may not want the debtor to be made aware of the sale price . This occurs particularly where the sale price is at a significant discount.

If the debtor is not a party to the deed of assignment, proper notice of the assignment must be provided.  

An assignment of debt that has not been properly perfected will not constitute a legal debt owing to the assignee. Rather, the legal right to recover the debt will remain with the assignor. Only an equitable interest in the debt will transfer to the assignee.  

Enforcing an Assigned Debt 

After validly assigning a debt (in writing and notice has been provided to the debtor’s last known place of residence), the assignee is entitled to take any legal steps available to them to recover the outstanding debt. These recovery options include:

• commencing court proceedings;
• obtaining a judgment; and 
• enforcement of that judgment.

Suppose court proceedings have been commenced or judgment already entered in favour of the assignor. In that case, the assignee must take steps to have the proceedings or judgment formally changed into the assignee’s name.  

In our experience, recovery of an assigned debt can be problematic because:  

• debtors often do not understand the concept of debt assignment and may not be aware that their credit contract contains an assignment of debt clause;
• disputes can arise as to whether a lawful assignment of debt has arisen. A debtor may claim that the assignor did not provide them with the requisite notice of the assignment, or in some cases, a contract will specifically exclude the creditor from legally assigning a debt;
• proper records of the notice of assignment provided to the debtor must be maintained. If proper records have not been kept, it may be difficult to prove that notice has been properly given, which may invalidate the legal assignment; and
• the debtor has the right to make an offsetting claim in defence to any recovery action taken by the assignee. A debtor may raise an offsetting claim which has arisen out of a previous arrangement with the assignor (which the assignee may not be aware of). For example, the debtor may have entered into an agreement with the assignor whereby the assignor agreed to accept a lesser amount of the debt owed by way of settlement. Because the assignee acquires the same rights and obligations of the assignor, the terms of that previous settlement agreement will bind the assignee. The court may find that there is no debt owing by the debtor. In this case, the assignee will have been assigned nothing of value. 

Other Considerations 

When assigning a debt, it is essential that the assignee, in particular, considers relevant statutory limitation periods for commencing proceedings or enforcing a judgment debt . In New South Wales, the time limit:

• to file legal proceedings to recover debts is six years from the date of last payment or when the debtor admitted in writing that they owed the debt; and
• for enforcing a judgment debt is 12 years from the date of judgment.

An assignment of a debt does not extend these limitation periods.  

While there can be benefits to both the assignor and the assignee, an assignment of debt will be unenforceable if done incorrectly. Therefore, if you are considering assigning or being assigned a debt, it is important to seek legal advice. If you need help with drafting or reviewing a deed of assignment or wish to recover a debt that has been assigned to you, contact LegalVision’s debt recovery lawyers on 1300 544 755 or fill out the form on this page.  

An assignment of debt is an agreement that transfers a debt owed to one entity, to another. A creditor does not need the consent of the debtor to assign a debt.

Once the assignee has validly assigned a debt, they are entitled to take any legal steps available to them to recover the outstanding debt. This includes commencing court proceedings, obtaining a judgment and enforcement of that judgment.

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Assignment Of Debt Agreement

Jump to section, what is an assignment of debt agreement.

An assignment of debt agreement is a legal document between a debtor and creditor that outlines the repayment terms. An assignment of debt agreement can be used as an alternative to bankruptcy, but several requirements must be met for it to work.

In addition, if obligations are not met under a debt agreement, it might still be necessary to file for bankruptcy later on. Therefore, consulting with an attorney specializing in debt agreements is always recommended before entering into one of these contracts.

Assignment Of Debt Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10 5 exhibit1024f10qsbmay04.htm EXHIBIT 10.24 , Viewed December 20, 2021, View Source on SEC .

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Debt Assignment and Assumption Agreement

Rating: 4.7 - 23 votes

A Debt Assignment and Assumption Agreement is a very simple document whereby one party assigns their debt to another party, and the other party agrees to take that debt on. The party that is assigning the debt is the original debtor; they are called the assignor. The party that is assuming the debt is the new debtor; they are called the assignee.

The debt is owed to a creditor.

This document is different than a Debt Settlement Agreement , because there, the original debtor has paid back all of the debt and is now free and clear. Here, the debt still stands, but it will just be owed to the creditor by another party.

This is also different than a Debt Acknowledgment Form , because there, the original debtor is simply signing a document acknowledging their debt.

How to use this document

This document is extremely short and to-the-point. It contains just the identities of the parties, the terms of the debt, the debt amount, and the signatures. It is auto-populated with some important contract terms to make this a complete agreement.

When this document is filled out, it should be printed, signed by the assignor and the creditor, and then signed by the assignee in front of a notary. It is important to have the assignee's signature notarized, because that is the party that is taking on the debt.

Applicable law

Debt Assignment and Assumption Agreements are generally covered by the state law where the debt was originally incurred.

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You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.

Other names for the document:

Agreement to Assign Debt, Agreement to Assume Debt, Assignment and Assumption of Debt, Assumption and Assignment of Debt Agreement, Debt Assignment Agreement

Country: United States

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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Deed of Assignment and the Notice of Assignment -What is the Difference?

In this article, Richard Gray barrister takes a brief look at the differences between a Deed of Assignment and a Notice of Assignment and the effect of the assignment on the contracting party

At the end of 2020, Elysium Law were instructed to act for a significant number of clients in relation to claims made by a company known as Felicitas Solutions Ltd (an Isle of Man Company) for recovery of loans which had been assigned out of various trust companies following loan planning entered into by various employees/contractors.

Following our detailed response, as to which please see the article on our website written by my colleague Ruby Keeler-Williams , the threatened litigation by way of debt claims seem to disappear. It is important to note that the original loans had been assigned by various Trustees to Felicitas, by reason of which, Felicitas stood in the shoes of the original creditor, which allowed the threatened action to be pursued.

After a period of inertia, Our Clients, as well as others, have been served with demand letters by a new assignee known as West 28 th Street Ltd . Accompanying the demand letters is a Notice of Assignment, by reason of which the Assignee has informed the alleged debtor of the Assignees right to enforce the debt.

Following two conferences we held last week and a number of phone call enquiries which we have received, we have been asked to comment upon the purport and effect of the Notice of Assignment, which the alleged debtors have received. Questions such as what does this mean (relating to the content) but more importantly is the ‘Notice’ valid?

Here I want to look briefly at the differences between the two documents.

There is no need for payment to make the assignment valid and therefore it is normally created by Deed.

 The creation of a legal assignment is governed by Section 136 of the Law of Property Act 1925:

136 Legal assignments of things in action.

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

(a) the legal right to such debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor:

Some of the basic requirements for a legal assignment are;

• The assignment must not be subject to conditions.
• The rights to be assigned must not relate to only part of a debt, or other legal chose in action.
• The assignment must be in writing and signed by the assignor.
• The other party or parties to the agreement must be given notice of the assignment.

Notice of assignment

To create a legal assignment, section 136 requires that express notice in writing of the assignment must be given to the other contracting party (the debtor).

Notice must be in writing

Section 136 of the LPA 1925 requires “express notice in writing” to be given to the other original contracting party (or parties).

 Must the notice take any particular form?

The short answer is no. Other than the requirement that it is in writing, there is no prescribed form for the notice of assignment or its contents. However, common sense suggests that the notice must clearly identify the agreement concerned.

Can we  challenge the Notice?

No. You can challenge the validity of the assignment assignment by ‘attacking the Deed, which must conform with Section 136. In this specific case, the Notice sent by West 28 th Street in itself is valid. Clearly, any claims made must be effected by a compliant Deed and it is that which will require detailed consideration before any right to claim under the alleged debt is considered.

Can I demand sight of the assignment agreement

On receiving a notice of assignment, you may seek to satisfy yourself that the assignment has in fact taken place. The Court of Appeal has confirmed that this is a valid concern, but that does not give an automatic right to require sight of the assignment agreement.

In Van Lynn Developments Limited v Pelias Construction Co [1969]1QB 607  Lord  Denning said:

“After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid…”

The Court of Appeal subsequently confirmed this  stating the contracting party is entitled to satisfy itself that a valid absolute assignment has taken place, so that it can be confident the assignee can give it a good discharge of its obligations

The important document is the Deed of Assignment, which sets out the rights assigned by the Assignor. The Notice of Assignment is simply a communication that there has been an assignment. The deed is governed by Section 136 of the LP 1925. It should be possible to obtain a copy of the Deed prior to any action taken in respect of it.

For more information on the claims by West 28 th Street or if advice is needed on the drafting of a Deed, then please call us on 0151-328-1968 or visit www.elysium-law.com .

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Assignment of debts - take care with cross-referencing

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In the recent High Court decision in Nicoll -v- Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch), the validity of an assignment of debts and the notice requirements is considered.

The High Court in this case considered whether a notice of assignment in relation to a debt, which mentioned an unverifiable date of assignment, was still valid and enforceable against the debtor. 

The debt in question originally arose between the debtor and the Co-operative Bank (Bank) and was evidenced in various facility letters between September 2010 and May 2013. A sum of over £10 million was advanced by the Bank to the debtor, and security was taken by the Bank in the form of charges over certain property. The overall balance was repayable by May 2015, but the debtor defaulted on the payment terms.

On 29 July 2016, the Bank assigned (or purported to assign) its debt and security to Promontoria. Both the Bank and Promontoria provided joint notice of the assignment in a single document to the debtor on 2 August 2016, with wording that the debt had been assigned ‘on and with effect from 29 July 2016’. There was no express reference to the date of the assignment or the assignment effective date, but rather this was defined by reference to the completion date in a related but unreferenced loan sale deed, so a more complicated analysis of a series of documents was required to reach the actual date of the assignment.

Promontoria proceeded to pursue the debtor for the debt by serving a statutory demand, dated 27 January 2017, and referred to the deed of assignment within its contents for payment of the outstanding debt.

The debtor’s attempt to have the statutory demand set aside was dismissed at the initial hearing, but the debtor received leave to appeal to the High Court on one issue. The debtor sought to challenge the effectiveness of the assignment of the debt based on an inability to work out from the notice of assignment whether the completion date for assignment had actually occurred. The debtor argued that:

• the case of WF Harrison -v- Burke [1956] 1 W.L.R. 419 is authority that a notice of assignment that gets the date of assignment wrong is invalid and, as a result, the assignment is not good against any debtor; and
• the date of assignment stated in the notice given to him was unverifiable, and therefore potentially wrong, rendering the notice invalid

The High Court agreed that the documentation disclosed by Promontoria to the debtor after the notice of assignment was insufficient to verify the date on which assignment had occurred, due to cross-referencing to other documents and there being conditions for completion. However, the High Court distinguished this case from WF Harrison -v- Burke case as the joint notice of assignment did not specify the date of the deed of assignment. It specified the date on which the assignment took effect, which is different. In WF Harrison -v- Burke , the notice of the assignment (given by the assignee only) specified the date of the assignment document (as opposed to the assignment itself) and got it wrong. In the present case, the notice of assignment was from both Promontoria and the Bank, i.e. assignor and assignee and made clear that the parties considered the assignment to be complete. In the circumstances, the debtor was not entitled to challenge Promontoria’s title to the debt.

The High Court accepted that while Promontoria had not produced evidence which in terms showed what the effective date of the assignment was, the joint notice clearly showed that both the Bank and Promontoria agreed and accepted that the assignment had taken place, and was sufficient evidence for the present purposes to be valid. The judge said: ‘The question is not whether Promontoria have provided a chain of proof through the wording of the documents. If that were the question then Promontoria would fail. The question is whether Promontoria has demonstrated that there is a completed assignment. I consider that it has. The crucial matter is the notice of assignment, against the background of the assignment document. The assignment documentation demonstrates a clear intention to assign even if the documents do not match up as they ought to. The notice of assignment provides clear evidence that the assignment has taken place.’ Accordingly, the High Court concluded that there was no arguable case that the assignment’s effective date had not occurred and considered that the assignment had been sufficiently demonstrated to be effective as against the debtor.

The High Court clearly held that a notice of assignment of a debt given to a debtor was valid, even though the assignment effective date, referred to in the notice, could not be verified by the debtor. The judgment provides strong support for the proposition that it is not open to debtors to seek to find alleged defects in any assignment, as long as they have been properly notified of the assignment and most importantly that the assignor and assignee both agree that the assignment is valid. This is a welcome decision for all creditors.

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Bankruptcy & Insolvency News SLF Lawyers News Is Your Notice Assignment of Debt Valid? May 25, 2020

A creditor (assignor) can transfer their rights to receive and seek payment of a debt to a third party (assignee). Once the transfer of their rights has occurred, the assignor can then seek payment of that debt from the debtor. Once assigned, the assignee has the legal right to such debt and has the power to give a good discharge of it  without the concurrence of the assignor. [1]

There are two factors that an assignee must consider before attempting to recover a debt from a debtor:

SERVICE OF THE NOTICE

The assignee must issue a notice of assignment of debt (“ Notice ”) to the debtor at the debtors last known residential address. This is where the confusion and issues around the service of the Notice can occur by the debtor. Generally, a bank will assign the debt to a collection company after years of attempting collection/locating debtor. It is at this stage that the debtor may have moved residential addresses and may not receive the Notice. The assignee is required to comply with section 347 of the  Property Law Act 1974  (Qld), whereby service of any notices must be made to the person’s last known place of abode.

STATUTE OF LIMITATIONS

An assignee must ensure that they are within the statue of limitations to legally commence recovery of the debt. The purpose of a statute of limitations is to limit the delay for creditors to take action against a debtor for outstanding monies. The limitation period for a contract debt is six (6) years, calculated from the point of breach. Where an assignee has been assigned a debt, the point of breach will commence from the date the debt was assigned to the assignee. However, in some circumstances, where a debtor acknowledges the debt or makes a payment in respect of the debt, the point of breach starts from the date of acknowledgement or the last payment made by the debtor.

SLF Lawyers specialises in legal recoveries and various enforcement options and can assist in providing advice with respect to ensuring the Notice has been issued correctly.

If you have any questions, please contact Partner – Mark Smith of SLF Lawyers Brisbane on (07) 3839 8011.

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Providing notice of assignment of a debt is not a condition precedent pursuant to fla. statute § 559.715.

 A.  H olding

The failure to provide written notice under section Fla. Stat. § 559.715 did not bar the Mortgagee’s foreclosure suit, nor did it create a condition precedent to the institution of the foreclosure suit.

B.  Procedural Posture & Facts

U.S. Bank foreclosed on a mortgage and note held by the Brindises.  At the conclusion of a nonjury trial, the Court entered a final foreclosure judgment in favor of the Bank.  The Brindises as mortgagors appealed claiming that that the trial court erroneously entered final judgment because, prior to filing suit, U.S. Bank failed to give written notice of assignment pursuant as required by Fla. Stat. § 559.715.

The Brindises, Appellants/Mortgators, appealed to the Second District Court whether trial court erroneously entered final judgment because, prior to filing suit,  the Appellee/Mortgagee, U.S. Bank, failed to provide written notice of the assignment of their mortgage loan as required by Fla. Stat. § 559.715.

C.   Rationale

Fla. Stat. § 559.715 provides in part:

  Assignment of consumer debts. —This part does not prohibit the assignment, by a creditor, of the right to bill and collect a consumer debt. However, the assignee must give the debtor written notice of such assignment as soon as practical after the assignment is made, but at least 30 days before any action to collect the debt. The assignee is a real party in interest and may bring an action to collect a debt that has been assigned to the assignee and is in default….

The DCA failed to rule whether an effort to collect on a defaulted mortgage is or is not an attempt to collect a consumer debt. Appellant contended that foreclosure is an enforcement of a security instrument and not a debt while the Appellee argued that it is a collection of a consumer debt.  Rather, the DCA noted that the Legislature failed to provide precise language specifying that the notice as a “condition precedent,” and the language of the statute was open ended meaning that the assignee alone was not the only real party in interest.

The statue prohibited specified debt collection practices, however, the Appellants failed to allege any specific wrongful conduct by the Appellee, and the Court was unwilling to apply the statute to “immunize” an alleged violator. The mere filing of a foreclosure suit, even one seeking money damages, alone did not trigger an egregious debt collection activity.  The note at issue specifically provided that the lender could transfer the note without prior notice to them, and as a matter of simple contract, the statue was inapplicable.

Based on the “innumerable foreclosure cases” pending in the trial and district courts where defendants have raised the statute as a defense, the Second District certified the following question to the Florida Supreme Court:

IS THE PROVISION OF WRITTEN NOTICE OF ASSIGNMENT UNDER SECTION 559.715 A CONDITION PRECEDENT TO THE INSTITUTION OF A FORECLOSURE LAWSUIT BY THE HOLDER OF THE NOTE?

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English law assignments of part of a debt: Practical considerations

United Kingdom |  Publication |  December 2019

Enforcing partially assigned debts against the debtor

The increase of supply chain finance has driven an increased interest in parties considering the sale and purchase of parts of debts (as opposed to purchasing debts in their entirety).

While under English law part of a debt can be assigned, there is a general requirement that the relevant assignee joins the assignor to any proceedings against the debtor, which potentially impedes the assignee’s ability to enforce against the debtor efficiently.

This note considers whether this requirement may be dispensed with in certain circumstances.

Can you assign part of a debt?

Under English law, the beneficial ownership of part of a debt can be assigned, although the legal ownership cannot. 1  This means that an assignment of part of a debt will take effect as an equitable assignment instead of a legal assignment.

Joining the assignor to proceedings against the debtor

While both equitable and legal assignments are capable of removing the assigned asset from the insolvency estate of the assignor, failure to obtain a legal assignment and relying solely on an equitable assignment may require the assignee to join the relevant assignor as a party to any enforcement action against the debtor.

An assignee of part of a debt will want to be able to sue a debtor in its own name and, if it is required to join the assignor to proceedings against the debtor, this could add additional costs and delays if the assignor was unwilling to cooperate. 2

Kapoor v National Westminster Bank plc

English courts have, in recent years, been pragmatic in allowing an assignee of part of a debt to sue the debtor in its own name without the cooperation of the assignor.

In Charnesh Kapoor v National Westminster Bank plc, Kian Seng Tan 3 the court held that an equitable assignee of part of a debt is entitled in its own right and name to bring proceedings for the assigned debt. The equitable assignee will usually be required to join the assignor to the proceedings in order to ensure that the debtor is not exposed to double recovery, but the requirement is a procedural one that can be dispensed with by the court.

The reason for the requirement that an equitable assignee joins the assignor to proceedings against the debtor is not that the assignee has no right which it can assert independently, but that the debtor ought to be protected from the possibility of any further claim by the assignor who should therefore be bound by the judgment.

Application of Kapoor

It is a common feature of supply chain finance transactions that the assigned debt (or part of the debt) is supported by an independent payment undertaking. Such independent payment undertaking makes it clear that the debtor cannot raise defences and that it is required to pay the relevant debt (or part of a debt) without set-off or counterclaim. In respect of an assignee of part of an independent payment undertaking which is not disputed and has itself been equitably assigned to the assignee, we believe that there are good grounds that an English court would accept that the assignee is allowed to pursue an action directly against the debtor without needing the assignor to be joined, as this is likely to be a matter of procedure only, not substance.

This analysis is limited to English law and does not consider the laws of any other jurisdiction.

Notwithstanding the helpful clarifications summarised in Kapoor, as many receivables financing transactions involve a number of cross-border elements, assignees should continue to consider the effect of the laws (and, potentially court procedures) of any other relevant jurisdictions on the assignment of part of a debt even where the sale of such partial debt is completed under English law.

Legal title cannot be assigned in respect of part of a debt. A partial assignment would not satisfy the requirements for a legal assignment of section 136 of the Law of Property Act 1925.

If an assignor does not consent to being joined as a plaintiff in proceedings against the debtor it would be necessary to join the assignor as a co-defendant. However, where an assignor has gone into administration or liquidation, there may be a statutory prohibition on joining such assignor as a co-defendant (without the leave of the court or in certain circumstances the consent of the administrator).

[2011] EWCA Civ 1083

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Assignment Involves Transfer of Rights to Collect Outstanding Debts

Can a person who is owed money transfer the right to collect to another person, the law allows a creditor to whom a debtor owes money to transfer the right to collect the outstanding monies to another person who then becomes the assignee creditor., understanding what constitutes as a legally binding assignment of creditor rights to collect a debt.

Right to Collect on Debts

Within the decision of Clark v. Werden , 2011 ONCA 619 the Court of Appeal confirmed the existence of the right to transfer debts as an assignment in accordance to the Conveyancing and Law of Property Act , R.S.O. 1990, c. C.34 , which prescribes the various requirements when a creditor transfers ownership of rights involving monies owed, among other things. Specifically, the Court of Appeal stated:

Clark v. Werden , 2011 ONCA 619 at paragraph 13

[13]   The ability to assign a debt or legal chose in action is codified in s. 53 of the  Conveyancing and Law of Property Act , which provides that a debt is assignable subject to the equities between the original debtor and creditor and reads as follows:

53 (1) Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor.

Partially Assigned

It is notable that the statute makes mention of " absolute assignment " without clearly addressing the rights and method of treatment for a partial assignment of a debt.  In this circumstance, where more than one assignee may obtain or assume the rights of the creditor (or earlier assignee), a partial assignee is required to join all assignees when bringing legal action against the debtor.  This view was stated by the Court of Appeal in  DiGuilo v. Boland , 1958 CanLII 92 where it was said:

DiGuilo v. Boland , 1958 CanLII 92

The main reason why an assignee of a part of a debt is required to join all parties interested in the debt in an action to recover the part assigned to him is in my opinion because the Court cannot adjudicate completely and finally without having such parties before it.  The absence of such parties might result in the debtor being subjected to future actions in respect of the same debt, and moreover might result in conflicting decisions being arrived at concerning such debt.

Failed Notice

Of potentially grave concern to creditors, and potentially with great relief to debtors, for an assignee to retain the right to pursue the debtor, express written notice of the assignment is required.  This requirement was stated in 1124980 Ontario Inc. v. Liberty Mutual Insurance Company and Inco Ltd. , 2003 CanLII 45266  as part of the four part test to establish the right to pursue an assigned debt:

1124980 Ontario Inc.  v. Liberty Mutual , 2003 CanLII 45266 at paragraph 44

[44]   Accordingly, for there to be a valid legal assignment under  section 53(1) of the  CLPA , four requirements must be met:

a)  there must be debt or chose in action;

b)  the assignment must be absolute;

c)  the assignment must be written; and

d)  written notice of the assignment must be given to the debtor.

Where there is a failure of notice, and therefore failure to comply with the Conveyancing and Law of Property Act , it is said that the right to assign fails in law; however, relief in equity, via an equitable assignment may be available to an assignee affected by failure of notice.  Generally, in equity, when failure of notice occurs, the assignee is unable, in law, to bring an action in the name of the assignee and may do so only in the name of the creditor; however, even in the absence of proper notice as results in failure of assignment in law, and failure ot enjoin the creditor in an action pursued as an equitable assignment, the court may remain prepared to waive such a requirement whereas such occurred in the matter of  Landmark Vehicle Leasing Corporation v. Mister Twister Inc. , 2015 ONCA 545 wherein it was stated:

Landmark v. Mister Twister , 2015 ONCA 545 at paragraphs 10 to 16

[10]    Section 53(1) requires “ express notice in writing ” to the debtor.  Although there is some ambiguity in her reasons, it would appear that the trial judge found that Mr.  Blazys had express notice of the assignment, but not notice in writing.  Ross Wemp Leasing therefore did not assign the leases to Landmark in law: see  80 Mornelle Properties Inc.  v. Malla Properties Ltd. , 2010 ONCA 850 (CanLII) , 327 D.L.R.  (4th) 361, at para.  22 .  Ross Wemp Leasing did, however, assign the leases to Landmark in equity.  An equitable assignment does not require any notice, let alone written notice:  Bercovitz Estate v. Avigdor , [1961] O.J.  No.  20 (C.A.), at paras.  16, 25.

[11]   The appellants, relying on  DiGuilo v. Boland , 1958 CanLII 92 (ON CA), [1958] O.R.  384 (C.A.), aff’d, [1961] S.C.C.A.  vii, argue that as the appellants did not have written notice of the assignment, Landmark could not sue on its own.  Instead, Landmark had to join Ross Wemp Leasing in the action.  The appellants argue that the failure to join Ross Wemp Leasing requires that the judgment below be set aside.

[12]    DiGuilo does in fact require that the assignor of a chose in action be joined in the assignee’s claim against the debtor when the debtor has not received written notice of the assignment.  The holding in DiGuilo tracks rule 5.03(3) of the  Rules of Civil Procedure , R.R.O.  1990, Reg.  194 : In a proceeding by the assignee of a debt or other chose in action, the assignor shall be joined as a party unless,

(a) the assignment is absolute and not by way of charge only; and

(b) notice in writing has been given to the person liable in respect of the debt or chose in action that it has been assigned to the assignee.  [Emphasis added.]

[13]   Yet the assignee’s failure to join the assignor does not affect the validity of the assignment or necessarily vitiate a judgment obtained by the assignee against the debtor.  Rule 5.03(6) reads:

The court may by order relieve against the requirement of joinder under this rule.

[14]   The joinder requirement is intended to guard the debtor against a possible second action by the assignor and to permit the debtor to pursue any remedies it may have against the assignor without initiating another action:  DiGuilo , at p.  395.  Where the assignee’s failure to join the assignor does not prejudice the debtor, the court may grant the relief in rule 5.03(6) : see  Gentra Canada Investments Inc.  v. Lipson , 2011 ONCA 331 (CanLII), 106 O.R.  (3d) 261, at paras.  59 - 65 , leave to appeal refused, [2011] S.C.C.A.  No.  327.

[15]   In this case, the trial judge found that Mr.  Blazys, and effectively all of the appellants, gained actual notice of the lease assignments very shortly after the assignments were made and well before Landmark sued.  Armed with actual, albeit not written, notice of the assignment, the appellants could fully protect themselves against any prejudice from Landmark’s failure to join Ross Wemp Leasing.  Had the appellants seen any advantage in joining Ross Wemp Leasing, either to defend against Landmark’s claim or to advance a claim against Ross Wemp Leasing, the appellants could have moved for joinder under rule 5.03(4).  The appellants’ failure to bring a motion to add Ross Wemp Leasing speaks loudly to the absence of any prejudice caused by Landmark’s failure to join the assignor.

[16]   Ross Wemp Leasing perhaps should have been a party to the proceeding.  Landmark’s failure to join Ross Wemp Leasing, however, did not prejudice the appellants and should have had no impact on the trial judgment.  If requested, this court will make a  nunc pro tunc order relieving Landmark from the requirement of joining Ross Wemp Leasing in the action.

Summary Comment

The rights to collect on a debt can be sold and transferred from the original creditor to a substitute creditor or assignee who then takes on the rights of the original creditor.  Indeed, the selling and buying of individual debts, or debts within an entire portfolio debts is common within business.  The entire collection services industry is based on the concept of buying outstanding debt and then standing in the shoes of the original creditor and pursuing the payment of the debt.  Other forms of buying and selling debt includes mortgage swaps, among other things.

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Notice of Assignment of Debt – What You Can Do

Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Total amount of debt?

For free & impartial money advice you can visit MoneyHelper . We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

For free & impartial money advice you can visit MoneyHelper . We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

When you get a ‘notice of assignment of debt’, you might feel worried. This letter means your debt has been passed to someone else, often a debt collection agency. We understand this can be scary, but don’t worry; we’re here to help. More than 170,000 people come to our website every month for advice on issues like this.

This article will help you understand:

• What a ‘notice of assignment of debt’ is.
• What to do if you get one.
• Different kinds of notices.
• Your rights when your debt is passed on.
• How to deal with your debt.

We have a team who know what it’s like to be in your shoes, as some of them have had their own debts passed on to debt collectors. Our aim is to help you handle this situation in the best way possible. Let’s dive in and learn more about dealing with a ‘notice of assignment of debt’ .

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt , but the wrong one may be expensive and drawn out.

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This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

Notice of assignment of debt – how to deal with it

So, what does a notice of assignment of debt mean for you?

To put it very simply, it means that you now owe a different company money . You will be told in the notice of assignment of debt letter about which company has acquired the debt, so going forward, you should be dealing with them.

Many people believe that it is a blessing in disguise having a notice of assignment of debt. The new company may be easier to deal with , or may even be more flexible when it comes to interest rates and charges, which gives you more scope to pay back your debt quickly and easily. 

Getting your debt paid off is in both your and your creditor’s best interests. It will mean you don’t have to deal with lots of strongly worded letters and phone calls, and it means that they don’t have to consider further action against you. 

Payment plans

With a notice of assignment of debt, you may be able to arrange a suitable payment plan to repay the outstanding amount with the new company.

Often, these third parties are dedicated debt collection agencies, and deal with debts like yours every day. This means that they are set up to deal with any repayment plans and could offer interest freezes .

How a debt solution could help

Some debt solutions can:

• Stop nasty calls from creditors
• Freeze interest and charges
• Reduce your monthly payments

A few debt solutions can even  result in writing off some of your debt.

Here’s an example:

Monthly debt repayments

£429 reduction in monthly payments

If you want to  learn what debt solutions are available to you,  click the button below to get started.

What types of notice of assignment of debt are there?

You may think you have a grasp on what notice of assignment of debt is. It gets slightly more confusing, unfortunately, as there are two distinct types of notice of assignment of debt.

These two types are Legal and Equitable .

A legal notice of assignment of debt gives the purchasing company (the company that has bought the debt) the power to enforce the amount you owe .

You will also end up making payments to this company instead of the original creditor. 

A notice of assignment of debt that is described as ‘equitable,’ means that only the amount owed by you to the original creditor is transferred to the third party, or debt collection agency.

In these instances, the company that purchases the debt cannot enforce it , and the original creditor will still retain their original rights and responsibilities . 

What rights do debtors have when their debt is assigned?

• You must be informed about the assignment of the debt in the form of notice of assignment of debt
• You have the right to obtain accurate and clear information about the debt, including the amount owed and to whom it is owed
• You can dispute the debt if you believe it is incorrect or unjust
• You have a right to be offered a reasonable and affordable repayment plan . Don’t pressured into agreeing a repayment plan that you can’t afford
• Debt collectors can’t harass or threaten you.

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Every day our partners, The Debt Advice Service, help people find out whether they can lower their repayments and finally tackle or write off some of their debt.

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Why do creditors sell debts?

One of the most common questions in regard to notice of assignment of debt is why the original creditor sold the debt in the first place. And how can they sell it anyway?

It is, in fact, perfectly legal for the original creditor to sell the debt to another company.

Often, they include a clause in the fine print when you sign any credit agreement – it usually states that they are able to assign their rights to a third party . This inevitably means that you cannot dispute it.

We go through a few of the more commonly asked questions about notice of assignment of debt , and what it might mean for you.

Is there something missing? We’re all ears and eager to improve. Send us a message and let us know how we can make our article more useful for you.

You can email us directly at [email protected] to share your feedback.

Assignment of Debt – What You Need to Know

By aqila zulaiqha zulkifli ~ 23 june 2023.

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Aqila Zulaiqha Zulkifli

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Occasionally, to ensure liquidity and to reduce financial risk, a creditor may assign its rights to a debt repayment to another party. Such an arrangement is known as the assignment of debt.

An assignment generally means the transfer of contractual rights and liabilities to a third party without the concurrence of the other party to the contract. [1] The assigning party is known as the assignor, whereas the recipient party is known as the assignee.

Once an assignment occurs, the assignee stands in the exact position as the assignor and has the legal right to a debt, other remedies therein, and even the power to discharge the debt. The debtor must then, make all payments to the assignee, and not the assignor. In fact, if the debtor pays the assignor without the consent of the assignee, the debtor may risk having to pay the assignee all over again. [2]

An assignment of debt is governed by Section 4(3) of the Civil Law Act 1956 (the “Act”) (cited with approval in the Federal Court case of UMW Industries Sdn Bhd v Ah Fook [3] , in which, the elements of a statutory assignment of debt can be summarized as follows:

• the assignment must be in writing under the hand of the assignor (and not, i.e the agent of the assignor);
• the assignment must be absolute and not by way of charge only; and
• the express notice in writing must have been given to the person liable to the assignor (i.e the debtor).

The effect of a statutory assignment is that the assignee possesses the legal right to the debt and the right to sue the debtor in respect of the debt without needing to join the assignor. [4]

However, rest assured, an assignment that is not in compliance with Section 4(3) of the Act is not automatically invalid. A non-statutory assignment could still be valid in equity [5] , though the assignee would have to join the assignor in the proceeding, either as a plaintiff or defendant [6] . This is to ensure a just disposal of the action, by ensuring that all relevant parties are before the Court so that the assignor would not make a claim against the debtor in respect of the same debt.

As such, in conclusion, before accepting an assignment of debt, it is prudent for an assignee to ensure that the elements in Section 4(3) of the Act abovementioned are fulfilled. If the assignment is meant to be absolute, such terms should be clearly reflected in the deed of assignment, or the assignee runs the risk of being crippled in a legal proceeding to recover the debt in the absence of the assignor.

[1] United General Insurance Co Sdn Bhd v Progress Credit Sdn Bhd [1988] 2 MLJ 297

[2] malayawata steel berhad v government of malaysia & anor [1980] 2 mlj 103, [3] [1996] 1 mlj 365, [4] mbf factors sdn bhd v tay hing ju (t/a new general trading) [2002] 5 mlj 536, [5] khaw poh chhuan v ng gaik peng & ors [1996] 1 mlj 761 (fc), [6] chan min swee v melawangi sdn bhd [2000] 7 clj 1.

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Assignment of debts, statutory demands and offsetting claims

It is not uncommon for a creditor (assignor) to transfer their right to receive payment of a debt (assignment) to a third party (assignee). The assignee will then seek payment from the debtor.

The assignee of the debt can issue to the debtor company a statutory demand for the payment of the debt if the debt exceeds the statutory minimum, which is currently $2,000.

For the assignee issuing the statutory demand, there will be threshold issues as to whether notice of the assignment has been given to the debtor and whether appropriate details of the assignment are contained in the statutory demand.

Assignee has the same rights and obligations as the assignor

The assignee of the debt takes the assignment subject to the rights and obligations of the assignor.

This was demonstrated in the recent decision of Mascarene Pty Ltd v Slater [2016] VSC 395 relating to a building dispute.

In Mascarene a judgment debt was assigned and the assignee issued a statutory demand.

The Court held that the assignee was not prevented from seeking payment of interest as it had the same rights as the assignor, as if the assignment had not taken place.

However, the assignee also took the assignment subject to the obligations that would have applied to the assignor in respect of the debt.

In seeking to set aside the statutory demand the debtor company claimed it had an offsetting claim against the assignor for reinstatement costs relating to building works.

Although the assignee was not a party to the building contract and not personally liable for the reinstatement costs, the debtor company was successful in claiming the setoff and reducing the amount of the statutory demand by the amount of the reinstatement costs.

It is clear that an offsetting claim cannot be sidestepped by assigning the debt.

The assignee of a debt receives the benefit of the debt subject to the rights of the assignor but also subject to the assignor’s obligations in respect of the debt.

A statutory demand can be issued in respect of an assigned debt however the assignment does not prevent the debtor company from disputing the existence or amount of the alleged debt or seeking to raise an offsetting claim.

If you would like more information about these issues, please contact Graham Roberts on +61 7 3231 2404.

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This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.

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• CA DFPI Issues Notice of Proposed Rulemaking under the Debt Collection Licensing Act

On February 9, 2024, the Commissioner of the California Department of Financial Protection and Innovation (“DFPI” or “Department”) announced a proposed rulemaking limited to certain requirements related to reporting and assessments under the Debt Collection Licensing Act (“DCLA”). It has not yet responded to the comments it received in connection with a separate proposed rulemaking regarding the scope of the DCLA and its application to creditors (persons who extend consumer credit to a debtor).

With regard to assessments made by licensees, the DCLA requires a licensee to pay the Department annually its pro rata share of all costs and expenses reasonably incurred in the administration of the DCLA, with the first assessment to be imposed in 2024. The calculation of the pro rata share is based, in part, on the amount of net proceeds generated by California debtor accounts in the preceding year. The term “net proceeds” is not currently defined by statute. The proposed regulation seeks to amend the definitions found in Cal. Code Reg. Tit. 10 § 1850 to define net proceeds generated by California debtors accounts:

“‘Net proceeds generated by California debtor accounts’ means the amount retained by a debt collector from its California debt collection activity. (1) For a debt buyer as defined in Civil Code section 1788.50, this is equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses. (2) For a purchaser of debt that has not been charged off or debt that is not in default, this is equal to the amount it collects on a debt minus the prorated amount it paid for that debt, before deducting costs and expenses. (3) For a third-party collector, this is equal to the amount a collector receives from its clients, regardless of fee structure, before deducting costs and expenses. For purposes of this section, “client” means the company on whose behalf the third-party collector has been contracted to collect on an account. (4) For a first-party collector, this is equal to the amount it receives in fees and other charges from debtors that it would not have received had the debt been paid on time, before deducting costs and expenses. For purposes of this section, a first-party collector means a person or entity that collects a debt owed directly to it.”

With regard to annual reporting, the DCLA requires a licensee to file an annual report with the Commissioner and sets forth certain information that must be disclosed in the report. This rulemaking clarifies terms and establishes additional annual reporting requirements, such as a requirement to submit reports electronically. The rule clarifies that companies must report the total number of California debtor accounts collected on in the preceding year, which means “the sum of the following: (1) The total number of California debtor accounts collected in full. (2) The total number of California debtor accounts collected on that were resolved for less than the full amount of the debt. (3) The total number of California debtor accounts collected on where less than the full amount of the debt was collected, and a balance remains due.” The proposed rule also includes detail on reporting purchased accounts, portfolio accounts, and unsuccessful collection attempts.

The DFPI’s notice of proposed rulemaking activity can be found here . Any interested party may submit comments to the DFPI until March 27, 2024.

[ View source .]

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